DEVRY FIN 515 Week 4 Problem Set

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DEVRY FIN 515 Week 4 Problem Set

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• FIN 515 Week 4 Problem Set
• Bonds-1. Interest on a certain issue of bonds is
  paid annually with a coupon rate of 8. The bonds
  have a par value of 1,000. The yield to maturity
  is 9. What is the current market piece of these
  bonds? The bonds will mature in 5 years.
• Bonds-2. A certain bond has 12 years left to
  maturity. Interest is paid annually at a coupon
  rate of 10. The bonds are currently selling for
  850. What is their YTM?
• Bonds-3.  A certain bond pays a semiannual coupon
  rate at a 10 annual rate. The bond has a par
  value of 1,000. There are eight years to
  maturity. The yield to maturity is 9. What is
  the current price of the bond?
• Bonds-4. A particular corporate bond has a par
  value of 1,000. Coupon payments are 40 and are
  paid twice a year. Seven years are left on the
  life of the bond.The YTM is 9. What is the price
  of the bond?
• Bond-5. A given bond has 5 years to maturity. It
  has a face value of 1,000. It has a YTM of 5
  and the coupons are paid semiannually at a 10
  annual rate. What does the bond currently sell
  for?

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Bond-6. A given bond has five years left to
maturity. Interest is paid annually and the
annual coupon rate is 9. The par value of the
bond is 1,000. The bond currently sells for
1,000. What is the yield to maturity?9-1.Assume
Evco, Inc., has a current price of 50 and will
pay a 2 dividend in 1 year, and its equity cost
of capital is 15. What price must you expect it
to sell for right after paying the dividend in 1
year in order to justify its current
price?9-5.NoGrowth Corporation currently pays a
dividend of 2 per year, and it will continue to
pay this dividend forever. What is the price per
share if its equity cost of capital is 15 per
year?9-6.Summit Systems will pay a dividend of
1.50 this year. If you expect Summits dividend
to grow by 6 per year, what is its price per
share if its equity cost of capital is 11?9-7.
Dorpac Corporation has a dividend yield of 1.5.
Dorpacs equity cost of capital is 8, and its
dividends are expected to grow at a constant
rate. a. What is the expected growth rate of
Dorpacs dividends? b. What is the expected
growth rate of Dorpacs share price?9-12.Procter
Gamble will pay an annual dividend of 0.65 1
year from now. Analysts expect this dividend to
grow at 12 per year thereafter until the fifth
year. After then, growth will level off at 2 per
year. According to the dividend-discount model,
what is the value of a share of Procter Gamble
stock if the firms equity cost of capital is
8?